Popular Courses. Established in , trading began on the exchange in BOX was the first options exchange to offer price improvement to traders through a process called price improvement period. The exchange sends out the five best bids and offers on each option, providing participants with anonymity and transparency. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.
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Related Terms Montreal Exchange MX The Montreal Exchange MX is a fully electronic derivatives exchange that facilitates the trading of stock options and interest rate futures, as well as index options and futures. What Is Anonymous Trading? Anonymous trading occurs when high profile investors execute trades that are visible in an order book but do not reveal their identity.
Block Positioner Definition A block positioner is a dealer who, in order to facilitate a customer's large purchase or sale, takes positions for their own account. Multi-Leg Options Order A multi-leg options order is a trade that involves executing two or more options transactions within a single order.
What Is an Option Class? Stay up to date on result for: Boston Options Exchange. See more. Sentences for Boston Options Exchange. Boston Stock Exchange - Wikipedia. Trading on this exchange is executed through their Hybrid system enabling the customers to trade — either electronically or the erstwhile Open Outcry method. This method is a traditional one involving shouting and the use of hand signals to transfer information, especially about buy and sell orders.
Most of the trades are executed electronically, which constitutes a very large portion of their business through some of the large and complex institutional orders requiring the skill of the floor brokers are executed with the open outcry method.
This is to gain potential price movement. The CBOE designed its volatility index for creating volatility products. VIX is the ticker symbol Ticker Symbol Ticker Symbol is the use of letters to represent shares that are traded on the stock market. The holder of this instrument bears the to exchange it for a predetermined exercise price at a future date but isn't obliged to do so. Such volatility is calculated from both call and put options Put Options Put Option is a financial instrument that gives the buyer the right to sell the option anytime before the date of contract expiration at a pre-specified price called strike price.
It protects the underlying asset from any downfall of the underlying asset anticipated. The movements of the VIX significantly depend on market reactions. This was an indication to the investors around the globe that there was uncertainty in the market and thus decided to take the gains or realize the losses, which caused a greater aggregate equity supply and reduced demand and, in turn, increasing market volatility.
This exchange is also very popular for allowing the investors to practice their trades before they can be placed so their individual strategies can be tested without risks. Some of the key features of their virtual trading platforms are:. As an equity options market, it provides services of matching electronic orders to the traders and stockbrokers. This exchange offers options derivatives on around different securities. It generates orders which are completely tradable and also offers multiple competing market makers Market Makers Market makers are the financial institution and investment banks which ensures enough amount of liquidity in the market by maintaining enough trading volume in the market so that trading can be done without any problem.
It also provides SOLA, which is a popular trading platform that matches or improves prices of options contracts and gives responses to orders in less than 20 milliseconds. This exchange was the first one to offer the movement of the prices to the traders through a process called PIP Price Improvement Period.
The investor is required to have a broker who is willing and able to offer a facilitation trade — a trade in which the broker guarantees the first penny of the movement in the price. It is to be noted that only investors whose brokers offer this service can have access to the PIP. A key feature of the BOX market is the PIP auction, which is a patented automated trading mechanism permitting the brokers to seek and improve executable client orders.
However, for each trade, counterparty details will be made available on a delayed basis after the trade is executed to Options Participants that were party to the trade. Options Participants are required to keep this information confidential and not allowed to disclose it to any person other than those who are required to know it, or their professional advisers, except where required by law or applicable regulation.
Options Participants are required to make available personnel responsible for the resolution of trade processing queries, trade disputes and "out trades" when required to do so by BOX. OFPs may register as Market Makers, but are not required to do so. An Options Participant, other than a Market Maker in its appointed class es , who transacts, as principal or as agent submitting orders on behalf of the proprietary account of other broker-dealers, more than two times the number of Public Customer contracts executed by such Options Participant in a given month shall pay to BOX a per contract surcharge to be determined by the Board.
However, BOXR recognizes that it may be possible for an Options Participant to establish a relationship with a Customer or other person to deny agency orders the opportunity to interact on BOX and to realize similar economic benefits as it would achieve by executing agency orders as principal. It will be a violation of this Section for an Options Participant to circumvent this Section by providing an opportunity for a Customer to execute against agency orders handled by the Options Participant immediately upon their entry into the Trading Host.
In compliance with these procedures, price improvement transactions for Customer Orders may be consummated with the Options Participant who submits the order, with other Options Participants or with other Customers' "unrelated orders".
An Options Participant must not deliberately seek to effect a transaction under a single Options Participant or between two Options Participants other than by following the PIP procedures.
The PIP shall be 3 seconds. The subsequent price modifications to a Primary Improvement Order are treated as new Improvement Orders for the sake of establishing priority in the PIP process. Market Makers, except for a Market Maker that submits a Primary Improvement Order, may: 1 submit competing Improvement Order s for any size up to the size of the Customer Order; 2 submit competing Improvement Order s for any price equal to or better than the Primary Improvement Order; 3 improve the price of their Improvement Order s at any point during the PIP; and 4 decrease the size of their Improvement Order s only by improving the price of that order.
Any portion of an Improvement Order left unfilled shall be cancelled. The PIP Participant will receive additional allocation only after all other orders have been filled at that price level. Notwithstanding the provisions of i above, in all cases in which the Primary Improvement Order has priority it shall be entitled to a trade allocation of at least one 1 contract.
Note: It shall be considered conduct inconsistent with the just and equitable principles of trade for any Options Participant to engage in a pattern of conduct where the Options Participant submits Primary Improvement Orders into the PIP process for 2 contracts or less for the purpose of manipulating the PIP process in order to gain a higher allocation percentage than the Options Participant would have otherwise received in accordance with the allocation procedures set forth in this Section It shall be considered conduct inconsistent with just and equitable principles of trade for any Participant to enter unrelated orders into BOX for the purpose of disrupting or manipulating the Improvement Period process.
Where an Options Official determines that quotes from one or more particular markets in one or more classes of options are not reliable, the Options Official may direct the senior person in charge of BOX's Market Control Center to exclude the unreliable quotes from the Improvement Period determination of the NBBO in the particular option class es.
The Options Official may determine quotes in one or more particular options classes in a market are not reliable only in the following circumstances:. The away options exchange posting the NBBO is conducting a trading rotation in that options class.
Initially, and for at least a Pilot Period of eighteen months from the commencement of trading on BOX, there will be no minimum size requirement for Customer Orders to be eligible for the PIP process.
During this Pilot Period, BOXR will submit certain data, periodically as required by the Commission, to provide supporting evidence that, among other things, there is meaningful competition for all size PIP orders, that there is significant price improvement for all orders executed through the PIP, and that there is an active and liquid market functioning on BOX outside of the PIP mechanism.
Consequently, subsequent trade matching during the remainder of that PIP will follow the normal PIP priority rules, as set forth in Section 18 of this Chapter V, and the Market Maker Prime's modified quote will be treated as an unrelated order.
For purposes of this Section only, an Obvious Error will be deemed to have occurred under the following circumstances:. For purposes of this Section only, the Theoretical Price of an option is:. Where the execution price of a transaction executed as the result of an Obvious Error is adjusted, the adjusted price will be:.
Designated personnel in the MRC shall administer the application of this Rule as follows. Except as provided below, no relief under this Section will be provided unless notification is made within the prescribed time periods.
Adjust or Bust. MRC will determine whether there was an Obvious Error as defined above. If it is determined that an Obvious Error has occurred, MRC shall take one of the following actions: i where each party to the transaction is a Market Maker on BOX, the execution price of the transaction will be adjusted unless both parties agree to bust the trade within ten 10 minutes of being notified by MRC of the Obvious Error ii where at least one party to the Obvious Error is not a Market Maker on BOX the trade will be busted unless both parties agree to adjust the price of the transaction within thirty 30 minutes of being notified by MRC of the Obvious Error.
If a party affected by a determination made under this Rule so requests within the time permitted below, the BOXR Chief Regulatory Officer will review decisions made by the MRC under this Rule, including whether an Obvious Error occurred, whether the correct Theoretical Price was used, and whether an adjustment was made at the correct price.
A party may also request that the BOXR Chief Regulatory Officer provide relief under this Rule in cases where the party failed to provide the notification required in paragraph e i and MRC declined to grant an extension, but unusual circumstances must merit special consideration. A request for review must be made in writing within thirty 30 minutes after a party receives verbal notification of a final determination by MRC under this Rule, except that if notification is made after p.
Eastern Time, either party has until a. Eastern Time the next trading day to request review. The BOXR Chief Regulatory Officer shall review the facts and render a decision on the day of the transaction, or the next trade day in the case where a request is properly made after on the day of the transaction or where the request is properly made the next trade day. The price at which an order is executed shall be binding notwithstanding that an erroneous report in respect thereto may have been rendered, or no report rendered.
A report shall not be binding if an order was not actually executed but was reported to have been executed in error. An Options Participant must give up the name of the Clearing Participant through which the transaction will be cleared. If there is a subsequent change in identity of the Clearing Participant through whom a transaction will be cleared, the Options Participant must, as promptly as possible, report such change to BOX.
Every Clearing Participant shall be responsible for the clearance of BOX Transactions of such Clearing Participant and of each Options Participant that gives up such Clearing Participant's name pursuant to a letter of authorization, letter of guarantee or other authorization given by such Clearing Participant to such Options Participant, which authorization must be submitted to BOXR.
Generally, in the event of a BOX market outage, or interruption of service, a loss pertaining to an order that is entered into BOX will be absorbed by the order entering Participant organization. This provision shall not apply to appeals of disciplinary actions or other actions by BOXR as provided for in the Rules. A complex order is any order for the same account, but is not limited to, the following:. Spread Order. A spread order is an order to buy a stated number of call put option contracts and to sell the same number of call put option contracts, of the same class of options.
Straddle Order. A straddle order is an order to buy sell a number of call option contracts and the same number of put option contracts on the same underlying security which contracts have the same exercise price and expiration date e. Strangle Order. A strangle order is an order to buy sell a number of call option contracts and the same number of put option contracts in the same underlying security, which contracts have the same expiration date e.
Combination Order. A combination order is an order involving a number of call option contracts and the same number of put option contracts in the same underlying security and representing the same number of shares at option.
Combination orders with non-equity options legs. One or more legs of a complex order may be to purchase or sell a stated number of units of another security. A stock-option order is an order to buy or sell a stated number of units of an underlying stock or a security convertible into the underlying stock "convertible security" coupled with either i the purchase or sale of option contract s on the opposite side of the market representing either the same number of units of the underlying stock or convertible security or the number of units of the underlying stock necessary to create a delta neutral position; or ii the purchase or sale of an equal number of put and call option contracts, each having the same exercise price, expiration date, and each representing the same number of units of stock, as and on the opposite side of the market from, the stock or convertible security portion of the order.
A SSF-option order is an order to buy or sell a stated number of units of a single stock future or a security convertible into a single stock future "convertible SSF" coupled with either A the purchase or sale of option contracts s on the opposite side of the market representing either the same number of units of stock underlying the single stock future or convertible SSF, or the number of units of stock underlying the single stock future or convertible SSF necessary to create a delta neutral position; or B the purchase or sale of an equal number of put and call option contracts, each having the same exercise price, expiration date, and each representing the same number of units of underlying stock, as and on the opposite side of the market from, the stock underlying the single stock future or convertible SSF portion of the order.
Ratio Order. A spread, straddle or combination order may consist of a different number of contracts, so long as the number of contracts differs by a permissible ratio.
For purposes of this paragraph, a permissible ratio of contracts is any of the following : For purposes of this paragraph, a permissible ratio of contracts is any ratio that is equal to or greater than 0. For example, a one-to-two ratio which is equal to 0.
Butterfly Spread Order. A butterfly spread order is an order involving three series of either put or call options all having the same underlying security and time of expiration and, based on the same current underlying value, where the interval between the exercise price of each series is equal, which orders are structured as either i a "long butterfly spread" in which two short options in the same series offset by one long option with a higher exercise price and one long option with a lower exercise price or ii a "short butterfly spread" in which two long options in the same series are offset by one short option with a higher exercise price and one short option with a lower exercise price.
Box Spread Order. A box spread order is an order involving a a long call option and a short put option with the same exercise price, coupled with b a long put option and a short call option with the same exercise price; all of which have the same underlying security and time of expiration. Collar Order. A collar order is an order involving the sale of a call option coupled with the purchase of a put option in equivalent units of the same underlying security having a lower exercise price than, and same expiration date as, the sold call option.
Except as otherwise provided in this Section, complex orders shall be subject to all other BOX Rules that pertain to orders generally. Minimum Increments. Bids and offers on complex orders may be expressed in any decimal price pursuant to Section 6 of this Chapter V Minimum Trading Increments.
Complex Order Priority. Under the circumstances described above, the option leg of a stock-option order, as defined in subparagraph a 5 i of this Section, has priority over bids and offers established in the marketplace by orders and Market Maker quotes that are no better than the price of the options leg. The option legs of a stock-option order as defined in subparagraph a 5 ii , consisting of a combination order with stock, may be executed in accordance with the first sentence of this subparagraph b 2.
Execution of Orders. Complex orders will be executed without consideration of any prices that might be available on other exchanges trading the same options contracts. Types of Complex Orders. Complex orders may be entered as fill-or-kill or fill-and-kill orders, as defined in Section 14, or as all-or-none orders, which are resting limit orders to be executed in their entirety or not at all.
Failure to observe these requirements will be considered conduct inconsistent with just and equitable principles of trade and a violation of Section 14 of Chapter II of the Rules of the Exchange. A trade representing the execution of the options leg of a stock-option or SSF-option order may be cancelled at the request of any member that is a party to that trade only if market conditions in any of the non-Exchange market s prevent the execution of the non-option leg s at the price s agreed upon.
Options Participants registered as Market Makers have certain rights and bear certain responsibilities beyond those of other Options Participants. BOXR reviews applications and considers an applicant's market making ability and such other factors as BOXR deems appropriate in determining whether to approve an applicant's registration as a Market Maker. However, based on system constraints, capacity restrictions or other factors relevant to the maintenance of a fair and orderly market, the Board or its designee may defer, for a period to be determined in the Board's discretion, approval of qualifying applications for Market Maker status pending any action required to address the issue of concern to the Board.
Such an appointment shall consist of at least one class and may include all classes listed on BOX. In approving such appointments the Board or designated committee shall consider 1 the financial and technical resources available to the Market Maker, 2 the Market Maker's experience and expertise in market making or options trading, and 3 the maintenance and enhancement of competition among Market Makers in each class of options contracts to which they are appointed.
BOXR may consider any relevant information, including but not limited to the results of a Market Maker evaluation questionnaire, trading data, a Market Maker's regulatory history and such other factors and data as may be pertinent in the circumstances.
Failure by a Market Maker to meet minimum performance standards may result in, among other things:. Should, in any given month, a Market Maker transact a greater number of contracts outside of its appointment than within, said Market Maker shall pay to BOX a per contract surcharge, which shall be set by the Board.
Transactions of a Market Maker in its market making capacity must constitute a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and Market Makers should not make bids or offers or enter into transactions that are inconsistent with such course of dealings.
Ordinarily, Market Makers are expected to:. During trading hours, a Market Maker must maintain a continuous, two-sided market in those option classes in which the Market Maker is registered to trade, in a manner that enhances the depth, liquidity and competitiveness of the market. Engage, to a reasonable degree under the existing circumstances, in dealings for their own accounts when there exists, or it is reasonably anticipated that there will exist, a lack of price continuity, a temporary disparity between the supply of or demand for a particular option contract, or a temporary distortion of the price relationships between option contracts of the same class.
Compete with other Market Makers in all series of options classes to which the Market Maker is registered to trade. Make markets that will be honored for the number of contracts entered into BOX's system in all series of options classes to which the Market Maker is registered to trade. Update quotations in response to changed market conditions in all series of options classes to which the Market Maker is registered to trade.
Maintain active markets in all classes in which the Market Maker is appointed for a period of at least six months. As agent handling Customer orders, the Market Maker is required to:. Ensure that his acceptance and execution of orders as agent are in compliance with applicable Federal and Exchange rules and policies.
Nothing in this Section will limit any other power of the Board under these Rules, or procedures of BOXR with respect to the registration of a Market Maker or in respect of any violation by a Market Maker of the provisions of this Section 5. A Market Maker's bid and offer for a series of options contracts shall be accompanied by the number of contracts at that price the Market Maker is willing to buy from or sell to Customers. A Market Maker that enters a bid offer in a class in which he is appointed on BOX must enter an offer bid within the spread allowable under Section 5 of this Chapter VI.
Market Maker bids and offers are firm for all orders under this Rule and Rule 11Ac under the Exchange Act "Rule 11Ac" for the number of contracts specified in the bid or offer and according to the requirements of paragraph b above. Thirty Seconds Rule. Within thirty seconds of receipt of a Customer Order to buy or sell an option in an amount greater than its published quotation size, a Market Maker will execute the entire order or that portion of the order equal to its published quotation size and the bid or offer price will be revised.
A Market Maker must enter continuous quotations for the options classes to which it is appointed, as follows:. A Market Maker may be called upon by an Options Official to submit a single quote or maintain continuous quotes in one or more of the series of an options class to which the Market Maker is appointed whenever, in the judgment of such official, it is necessary to do so in the interest of fair and orderly markets.
A Market Maker may enter all order types permitted to be entered by Customers under the Rules to buy or sell options in classes of options listed on BOX to which the Market Maker is not appointed under Section 4 of this Chapter VI, provided that:. Market Maker orders are subject to the limitations contained in Chapter V, Section 17 of these Rules Customer Orders and Order Flow Providers as those paragraphs apply to principal orders entered by Options Participants.
The Market Maker does not enter orders in options classes to which an affiliated Options Participant is otherwise appointed as a Market Maker. Until the earlier of 1 one year from the date on which BOX commences operations or 2 the date on which BOX opens all listed options classes for trading, the Board may grant Market Makers exemptions from the requirements of paragraph e of this rule, subject to the following:.
Any exemption would be conditioned on the Participant performing Market Maker functions in the classes it trades;. An exemption could be revoked by BOXR at any time if the Market Maker is not acting in accordance with the terms of the exemption; and. No exemption would have a term of more than one month, but would be renewable on a monthly basis until all listed options classes were open for trading. In a manner prescribed by BOXR, each Market Maker shall file with BOXR and keep current a list identifying all accounts for stock, options and related securities trading in which the Market Maker may, directly or indirectly, engage in trading activities or over which it exercises investment discretion.
No Market Maker shall engage in stock, options or related securities trading in an account which has not been reported pursuant to this Section. Each Market Maker shall, upon the request of BOXR and in the prescribed form, report to BOXR every order entered by the Market Maker for the purchase or sale of i a security underlying options traded on BOX, or ii a security convertible into or exchangeable for such underlying security, as well as opening and closing positions in all such securities held in each account reported pursuant to paragraph a of this Section.
The report pertaining to orders must include the terms of each order, identification of the brokerage firms through which the orders were entered, the times of entry or cancellation, the times report of execution were received and, if all or part of the order was executed, the quantity and execution price.
No Market Maker shall, directly or indirectly, hold any interest or participate in any joint account for buying or selling any options contract unless each participant in such joint account is an Options Participant and unless such account is reported to, and not disapproved by, BOXR.
A participant in a joint account must:. Be jointly and severally responsible for assuring that the account complies with all the Rules of the Exchange. Not be a Market Maker appointed to the same options classes to which the joint account holder is also appointed as a Market Maker. A Letter of Guarantee shall provide that the issuing Clearing Participant accepts financial responsibilities for all BOX Transactions made by the guaranteed Participant. A revocation shall in no way relieve a Clearing Participant of responsibility for transactions guaranteed prior to the effective date of such revocation.
Each Market Maker which is a Clearing Participant shall also maintain net capital sufficient to comply with the requirements of the Clearing Corporation.
This equity requirement, as well as all other provisions of the section including capital maintenance requirements , applies to each Market Maker account, without regard to the number of Market Maker accounts per firm.
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